Cardtronics, the world’s largest non-bank owner of ATMs, announced its financial and operational results for the quarter and year ended December 31, 2010.
Key financial and operational statistics in the fourth quarter of 2010 compared to the fourth quarter of 2009 include:
Consolidated revenues of $134.7 million, up by 8%
Revenue growth of approximately 12% for the Company’s core business operations, which include the Company’s domestic Company-owned ATM placement, surcharge-free and managed services businesses, as well as its international operations
Gross margin of 32.4%, up from 31.4%
Adjusted EBITDA of $32.8 million, up approximately 19%
Adjusted Net Income per diluted share of $0.26, up from $0.17
GAAP Net Income of $8.0 million, up from $1.5 million
Free Cash Flow of $21.5 million, consisting of $32.2 million of cash provided by operating activities, less $10.7 million of capital expenditures, enabling a $26.8 million reduction in outstanding debt under the Company’s revolving credit facility
Continued improvements in several key operating metrics (amounts presented exclude transactions from the Company’s managed services offerings):
Total withdrawal transactions increased by over 6%;
Total transactions increased by over 10%; and
Total transactions per ATM increased by over 8%
Please refer to the “Disclosure of Non-GAAP Financial Information” contained later in this release for definitions of Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. For additional financial information, including reconciliations to comparable GAAP measures, please refer to the supplemental schedules of selected financial information at the end of this release.
“We finished 2010 with another strong quarter, capping off what was a great year for Cardtronics,” commented Steven Rathgaber, the Company’s Chief Executive Officer. Mr. Rathgaber continued, “For the full-year 2010, our revenues grew by 8% and our Adjusted Net Income per diluted share grew by 47%. We also generated $54.0 million in Free Cash Flow for the year, enabling us to reduce our ratio of total debt outstanding to Adjusted EBITDA to 1.9 from 2.8 a year ago. We are certainly proud of these financial achievements, but also believe we have many opportunities to continue to drive significant revenue and earnings growth in 2011 and beyond. With our leading network of ATMs placed in prime retail locations, increased focus on driving organic transaction and revenue growth and continued operational execution, we believe that we are well-positioned to continue to create significant shareholder value.”
Expansion of the Company’s bank branding agreement with PNC Bank to place 135 ATMs in CVS/pharmacy stores across Indiana.
Execution of a master service agreement with a major bank, allowing for the Company to provide multiple services including bank branding.
Execution of a multi-year agreement with a leading supermarket chain in the Northeast, to provide a full suite of ATM management services to over 80 high-volume ATMs by the third quarter of 2011.
Execution of an agreement with EZCORP, a leading provider of specialty consumer financial services, to place ATMs in up to 270 locations.
Execution of an agreement with Univision Prepaid Card, under which the Company will provide Univision’s prepaid cardholders with unlimited free access to ATMs in the Company’s Allpoint Network. A significant media campaign for the new cards has been launched on the Univision broadcast networks in the first quarter of 2011, highlighting the Allpoint Network’s ubiquitous tie to the program.
Execution of a multi-year agreement with North Carolina-based BB&T, one of the largest banking institutions in the U.S., to provide surcharge-free ATM access to its Florida and Texas banking clients through the Company’s Allpoint Network.
Addition of over 2,500 ATMs in Mexico to the Company’s Allpoint Network, providing U.S. Allpoint members with expanded benefits through convenient, surcharge-free ATM access while they travel to Mexico. This expansion grows the Allpoint Network reach to over 43,000 ATMs in the U.S., U.K., Puerto Rico, Australia and, now, Mexico.
Partnership with i-design, a United Kingdom-based provider of marketing platforms for self-service devices, to bring third-party advertising to the Company’s ATMs.
Finalization of a relationship with Softgate Systems (formerly IPP) to provide next-day bill payment capabilities on the Company’s 2,200 multi-function financial services kiosks in 7-Eleven retail locations, significantly increasing customer access for next-day bill payments to over 40,000 billers nationwide.
Launch of a second cash depot in Manchester, U.K., which brings the number of ATMs that the Company provides cash-in-transit services to approximately 1,380 ATMs in the U.K., up from approximately 780 at the end of 2009.
Execution of an agreement in the U.K. to obtain over 100 high-transacting ATMs in Northern Ireland.
Execution of the first managed services agreement in the U.K., with Yorkshire Building Society, a U.K. financial services institution, to take over the management of Yorkshire’s 20 ATMs.
FOURTH QUARTER RESULTS
For the fourth quarter of 2010, consolidated revenues totaled $134.7 million, representing an 8% increase from the $124.8 million in revenues generated during the fourth quarter of 2009. The 8% year-over-year increase reflects 12% revenue growth in the Company’s core business operations, which was driven by a combination of increases in transactions per machine, increased revenues from managed services agreements, year-over-year surcharge rate increases implemented in the United States, and unit growth in the Company’s United Kingdom and Mexico operating segments. Additionally, the Company continued to grow revenues in its leading surcharge-free network, Allpoint, with continued growth of its customer base.
Adjusted EBITDA for the fourth quarter of 2010 totaled $32.8 million, compared to $27.6 million during the fourth quarter of 2009, and Adjusted Net Income totaled $11.0 million ($0.26 per diluted share) compared to $7.0 million ($0.17 per diluted share) during the fourth quarter of 2009. These increases were primarily attributable to the increase in revenues (discussed above), the Company’s ability to leverage its fixed-cost infrastructure to generate strong margins from those higher revenues, and the reduced interest expense enabled by the refinancing of the Company’s debt executed in the previous quarter. Specific costs excluded from Adjusted EBITDA and Adjusted Net Income are detailed in a reconciliation included at the end of this press release.
GAAP Net Income for the fourth quarter of 2010 totaled $8.0 million, compared to $1.5 million during the same quarter in 2009. The year-over-year increase was attributable to the factors identified in the discussion of Adjusted EBITDA and Adjusted Net Income above.
Revenues totaled $532.1 million for the year ended December 31, 2010, representing an 8% increase over the $493.4 million in revenues recorded during the year ended December 31, 2009. As was the case with the Company’s quarterly results, the year-over-year increase in revenues was primarily attributable to revenue growth in its core business operations, slightly offset by a decline in the Company’s merchant-owned account base.
Adjusted EBITDA totaled $130.8 million for the year ended December 31, 2010, representing a 19% increase over the $110.4 million in Adjusted EBITDA for 2009, and Adjusted Net Income totaled $41.2 million ($1.00 per diluted share) for 2010, which represented a 51% increase from the $27.3 million ($0.68 per diluted share) generated during 2009. Increases in both Adjusted EBITDA and Adjusted Net Income were primarily due to the same factors noted above for the Company’s quarterly results and because of reduced operating costs per unit compared to the same period in the prior year.
GAAP Net Income for the year ended December 31, 2010 totaled $41.0 million, compared to $5.3 million during 2009. The results for the year ended December 31, 2010 include certain non-recurring items associated with the Company’s financing activities and reversal of domestic deferred tax asset valuation allowances during the year. Excluding these one-time effects, the improvement in the Company’s GAAP results was primarily driven by the same factors outlined above with respect to Adjusted EBITDA and Adjusted Net Income.
Below is the Company’s financial guidance for the fiscal year ending December 31, 2011, which is consistent with what was previously issued:
Revenues of $559.0 million to $569.0 million;
Overall gross margins of approximately 32.5% to 32.9%;
Adjusted EBITDA of $136.0 million to $141.0 million;
Depreciation and accretion expense of $45.0 to $45.8 million;
Cash interest expense of $19.0 million;
Adjusted Net Income of $1.14 to $1.20 per diluted share, based on approximately 41.9 million to 42.3 million weighted average diluted shares outstanding; and
Capital expenditures of approximately $50.0 million, net of noncontrolling interests.
The above Adjusted EBITDA and Adjusted Net Income guidance excludes the impact of $8.1 million of anticipated stock-based compensation expense and $15.2 million of expected intangible asset amortization expense, both on a pretax basis. Additionally, the above guidance is based on average foreign currency exchange rates of $1.50 U.S. to £1.00 U.K. and $13.00 Mexican pesos to $1.00 U.S.
For reconciliations of Adjusted EBITDA and Adjusted Net Income to comparable GAAP measures, please refer to the supplemental schedules at the end of this release.
The Company continues to maintain a very strong liquidity position, with $124.5 million in available borrowing capacity under the Company’s $175.0 million revolving credit facility as of December 31, 2010. The Company’s outstanding indebtedness as of December 31, 2010 consisted of $200.0 million in senior subordinated notes due 2018, $46.2 million in borrowings under its revolving credit facility due 2015, and $8.6 million in equipment financing notes associated with its majority-owned Mexico subsidiary.
In January 2011, the Company significantly expanded and extended the terms of the interest rate hedging program it utilizes to stabilize its vault cash rental costs in the United States. Further details on the changes in the Company’s interest rate hedging program in the United States are included in a schedule shown on page 10 of this release.
Cardtronics (Nasdaq:CATM) is the world’s largest non-bank owner of ATMs. The Company operates over 34,100 ATMs in the United States, the United Kingdom, Mexico, and the Caribbean, primarily with well-known retailers such as 7-Eleven®, Chevron®, Costco®, CVS®/pharmacy, ExxonMobil®, Hess®, Rite Aid®, Safeway®, Target®, and Walgreens®. Cardtronics also assists in the operation of approximately 2,900 ATMs under managed services contracts with customers such as Kroger®, Travelex®, and Circle K®. In addition to its retail ATM operations, the Company provides services to large and small banks, credit unions, and prepaid card issuers allowing them to place their brands on over 11,900 Cardtronics’ ATMs and providing surcharge-free access through Cardtronics’ Allpoint Network. For more information, visit http://www.cardtronics.com.